1. Field of the Invention
The present invention relates in general to the field of information processing and more specifically, to simulating product cost sensitivity to market demand.
2. Description of the Related Art
The globalization of today's economy has resulted in a growing interaction and interdependence between geographically dispersed manufacturers, markets and consumers. Prior to globalization, manufacturers routinely produced their products domestically, but sourced their raw materials from wherever they could be obtained at the lowest cost. Today, manufacturers are less concerned about where their products are manufactured or distributed and instead, are more focused on increasing their profit margins by reducing their overall cost of goods sold (COGS). The emergence of technological innovations, the connectivity provided by the Internet, and the availability of efficient and cost-effective transportation systems has introduced new dynamics in attaining this goal. As a result, companies now have the means to manufacture products at the lowest possible cost and market them where they will sell at the highest volume and price.
It is known to tap the potential of globalization by taking advantage of the low labor costs and specialized production capabilities of off-shore suppliers to manufacturers. All kinds of goods, ranging from discrete parts, to sub-assemblies, to complete products are produced offshore. However, despite the apparent advantages and benefits, operating in a global environment has attendant challenges. Offsetting these challenges can encompass a myriad of considerations relating to integration planning, sourcing, receiving, inventory control, manufacturing scheduling, warehousing, distribution management, customer service, and transportation.
For example, supply chains and logistics are becoming increasingly complex, sensitive to change, and expensive to manage, often requiring every aspect of the supply chain to be considered, including sources of supply, locations, shipping methods, carriers, routing and destinations. Also important is determining an optimal number, size and location of physical operations, with success or failure often hinging on making the right decisions at the right time, using existing and forecasted market metrics. Product distribution decisions can also be as demanding, especially when identifying the best transportation method from each location to establish least-cost routing for timely delivery to end customers. These decisions may be affected by a bewildering array of variables, the effects of which are many times poorly understood and only minimally reviewed and audited. Today's businesses are now realizing a need to be realistic about expectations, as these and other factors make it difficult to gain insight into the actual costs of foreign manufacturing and distribution.